In depth

Update 7: coronavirus advice note for employers

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The announcement of a Job Retention Scheme on 20th March 2020 represents a measure of Government intervention never before seen in employment relations.

Our clients have been wrestling with the scant guidance published to date since Friday evening.  In this note we highlight what we know and some of the many questions on which there is uncertainty pending draft legislation and further guidance. 

As soon as we have the draft legislation, we will be in a position to answer these questions which are subject to speculation at present. We expect the draft legislation to be available later this week.

What we do know about the Job Retention Scheme so far:

  • All employers are eligible
  • Payment from Government is to be available by the end of April and it can be backdated to the date furlough commenced, although not earlier than 1 March 2020
  • Employers will use an online portal to apply
  • The maximum Government contribution is 80% of “workers wage costs” up to £2,500 per month. 
  • The Scheme will run for at least 3 months from 1 March to 31 May 2020, but may be extended by the Government.
  • It cannot be imposed on employees, their agreement to be furloughed and the pay arrangements on which they are to be furloughed needs to be agreed with the employee (and it seems no particular process is needed, so just a simple agreement is likely to be fine)
  • There does not appear to be an obligation under the Scheme for the employer to top up the 80%, although depending on the terms of the employment contract, the employee will have to agree the change in pay rate i.e. the reduction from 100% assuming the employer does not intend to top up to normal pay.
  • Guidance says it will be available to all UK employers “to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis”.
  • Employees must not work during a period of furlough
  • The Scheme applies to all employees and workers registered on the employer’s PAYE system
  • We believe it would be an unfair dismissal for employers to proceed with redundancies without at least considering utilising the scheme.

What we don’t know:

  • Are the employer NICs, pension contributions and other benefits covered by the words “workers wage costs” which appear in the guidance to describe what the Government will cover?
  • Can an employee be on intermittent furlough leave, for example, be on furlough leave every other week? Or even be on furlough leave for part of the week and at work for the rest of the week?
  • How will the value of wage costs be calculated for those employees without normal working hours? Will it be average earnings over last 12/52 weeks prior to furlough commencing or some other reference period?
  • Is £2,500 the ceiling of 80% of wage costs, or is £2,500 the ceiling of 100% of wage costs out of which the Government will cover 80%, and is the £2,500 the value of pay/salary only or total remuneration plus benefits?
  • How will salary sacrifice be treated for the purposes of calculating the amounts due?
  • What is the threshold to be an employee “that would otherwise have been laid off during this crisis”, and what evidence will HMRC be entitled to see to be satisfied that an employee would have been “laid off”?
  • Can an employer seek volunteers to fill its furlough requirements, and is any sort of fair selection needed?
  • Does the term “laid off” when used in this sense relate to those who have been made redundant or does it also include those who have been told they are not required to attend work i.e. laid off with or without pay under a contractual right to do so?
  • Will there will be any repayment obligation if an employee furloughed is subsequently dismissed for redundancy within any timeframe after furlough ends?
  • Will the employee still need to receive national minimum wage for the hours they would have been in work had they not agreed to a period of furlough leave?
  • How will reinstatement and backdating work for employees already dismissed since 1 March 2020?
  • Will an employee continue to accrue paid holiday entitlement based on their normal wage during the furlough leave?
  • What happens if an employee has booked a period of annual leave while on furlough? Will the employer have to pay full wages, just the 20% extra or nothing more than the 80% the Government will reimburse?
  • Will an employee on furlough leave be able to take a second job during the hours that they would have been at work?
  • Will furlough leave be available where an employee has multiple jobs?
  • Can an employee on Statutory Sick Pay agree to a period of furlough leave and will that relieve the employer of the obligation to pay sick pay?
  • Will an employee on maternity leave or other statutory family leave be able to agree a period of furlough leave?
  • Will a period of furlough leave before maternity leave be taken into account for calculating the amount of statutory maternity pay due?

Further updates

For further updates and information regarding COVID-19, visit our page Dealing with coronavirus.


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